Patterson: Government pensions are not bottomless pits
Tom Patterson
East Valley resident Tom Patterson (pattersontomc@cox.net) is a retired physician and former state senator.
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Mike McClellan posted at 9:46 am on Sat, Jun 30, 2012.
Mr. Patterson is correct about pensions needing some reforms, especially the law enforcement/judges and politician pensions. They have crazy automatic cost of living increases and other egregious provisions.
However, I'm not sure Mr. Patterson's the one to make this call. As he notes, the largest pension in the state -- the one for government workers and teachers -- is the closest to being solvent and was in fact fully funded up to 2008. Further, it is the most conservative in investing.
That being said, the overarching reason for that pension -- and all pensions, including our own private 401(k)'s -- being currently underfunded is the market collapse in 2008.
A major reason for the collapse was weak oversight of the market's more "creative" financial products, in part due to the weak oversight laws.
Laws that Mr Patterson has argued do not need to be strengthened.
Yet, as we see with the current JP Morgan financial bloodbath (which was first reported by it to be "just" a $1 billion hit but now turns out to be $9 billion) our ability to oversee the complex derivative products is still pretty weak.
All pensions took a hit from the housing fiasco that also contributed to the financial product meltdown.
So, yes, some pension reform is needed. But without financial services reform, too, those pensions -- and our individual ones -- will still be susceptible to ruin from unethical behavior by those in whom we trust our investments.
Mr. Patterson might want to advocate additional reforms. But I doubt he'll do so.
IceCat posted at 10:02 am on Sat, Jun 30, 2012.
Legislators in this case are Republican,
ASRS benefits have actually decreased over the past 15 years.
Now the public safety pensions is another story. The 20 year retirement went out of style back in the early 1980's in that wild and strange liberal city of Los Angeles. Now in the CA state retirement system the normal public safety retirement age to collect a pension is 55.
Then we have the Republicans here approving the DROP program for public safety employees with a guarantee 8% return. Talking about fleecing the taxpayers.
The public safety pensions are underfunded because of the #1: giveaways of the past Republicans legisatures, #2: the small number of members of the retirement plan and #3: the crash of the stock market.
chatmandu002 posted at 4:44 pm on Sat, Jun 30, 2012.
Changing government retirement plans to a 401K type of retirement plan is the way go for new. Reform the government retirement plans and stop mortgaging our future trying to support these plans.
mnjcpa posted at 2:07 pm on Sun, Jul 1, 2012.
Nice try Mike - but your argument is very weak.
You know from my many comments on this subject, I not only align with Patterson's commentary but I have a deep understanding of the financial markets.
The problem with your argument is twofold. First, it's the `fixed` and `guaranteed` nature of these pensions that make it brutal to correct as Patterson so aptly points out . It's just not realistic to expect someone else to pay a lifetime series of benefits when the fund is broke. Private sector employees don't have that luxury of thumbing their nose at a sensible solution. Instead they take it in the shorts and deal with it. My argument is that workers should be on an even playing field like chatmandu suggests.
Secondly, it's all too easy to blame someone else and in Obama world, it's definitely popular to blame `big business`. Derivative contracts were dreamed up because the nature of the loans themselves were ridiculous to begin with. It was kind of like putting lipstick on a pig. It started with Barney Frank, Chris Dodd, and Bill Clinton basically requiring mortgage companies to finance people that were a bad risk. It's this stupid notion that everybody should be the same and own a home when the reality of life and America is everyone has the same opportunity but many don't work on their own to achieve it but expect it from others. That's entitlement.
At least you're willing to suggest reform because many aren't. You're just blaming the wrong target.
Mike McClellan posted at 2:39 pm on Sun, Jul 1, 2012.
Speaking of weak arguments . . .
First, you state as a premise that "the fund is broke." I'm not sure to which fund you refer, but in fact, the largest pension program in our state -- ASRS -- is far from "broke" and is -- again, in fact -- healthier than it was even two years ago.
Again -- in fact -- it is one of the 20 healthiest pension funds in the nation. You can look it up.
The Pew Study that Mr. Patterson references -- again ,in fact -- labels the ASRS fund a "solid performer." And that same study notes that the ASRS has one of the few 100% employee contribution health care plans. As the study notes, what brings down the overall state pension plans are the other two ones -- the law enforcement and politician plans.
And again -- in fact -- until 2008, the ASRS plan was funded at 106%. The only reason it dropped into the 70% range was due to the market crash. Unlike the other two plans, it has never had an automatic cost of living increase (in fact, it's up to the legislature to grant any kind of cost of living increase for ASRS), and it requires more employee contribution than the other two, and it requires more years of service to retire and it's average retirement is way below the other two -- the average ASRS retirement pay is $19,000 a year, about half of what the politician one is and about a third of the law enforcement.
What some pension critics -- again, not you -- try to do is conflate the politician and law enforcement pensions with the ASRS one, as if all three are the same.
I don't disagree with you that the idea of everyone should own a home is a dumb idea. But to be honest, you know as well as I that George Bush pushed the same idea during his administration. It was bipartisan idiocy, just like the weakening of Glas/Steagall was.
mnjcpa posted at 3:37 pm on Sun, Jul 1, 2012.
We're talking apples and oranges Mike. You're focused on Arizona as the argument. I'm looking at it from a national level. I'm debating it from a conceptual standpoint and you're focused on the solvency of Arizona's plan.
From a conceptual level the policy of having a contract with someone that gets a fixed lifetime benefit at the taxpayer's expense is out of touch fundamentally flawed to bring fiscal budgets in to balance instead of bankruptcy.
I'm not saying Bush was a saint either. But this entire financial industry debacle rests with responsibility of Frank/Dodd & Clinton - not `big business`. The LAST thing we need is more financial regulations but more people that are fiscally conservative in Congress. We can't even get a budget out of this administration which to me is appalling.
CooperG posted at 8:25 am on Mon, Jul 2, 2012.
The above commentary criticizing public pensions is from someone who doesn't need one. He has his own and he doesn't want YOU to have one if you served the public for your entire career. He wants you to have one even LESS if you were a member of a police or fire union.
mnjcpa posted at 9:28 am on Mon, Jul 2, 2012.
Hardly Cooper G. What I want people to know is the real financial truth that you don't get from the media. People are entitled to the truth.
I have nothing against people having a decent retirement. These pensions aren't a `decent` retirement Cooper....they're a financial `windfall` that taxpayers pay for - the REAL 1%. It's why cities and governments are going broke.
Retirement ages of 50-55 are 20 years ahead of a private sector employee that the private sector is paying for. How can you possibly explain the `fairness` of this? PS employees can't begin to put away these unreasonable benefits. My conclusion always is to ask your neighbor how they feel about paying you lifetime benefits and see how they feel about it.
Stockton and Wisconsin are just the beginning to see fiscal reform and we must get conservatives in Congress and the White House to make these changes.Otherwise count on Greece like conditions soon.
VofReason posted at 1:09 pm on Mon, Jul 2, 2012.
See Mike McC explains it perfectly. "And again -- in fact -- until 2008, the ASRS plan was funded at 106%. The only reason it dropped into the 70% range was due to the market crash." Yes, if markets always went up and we can rely on more and more taxpayer funding, everything would be fine. Of course reality and the fact that people don't want to pay higher taxes every year kind of effect that logic. For the brilliance of statement, "The above commentary criticizing public pensions is from someone who doesn't need one". Right, "Dr" Patterson probably just answered a phone in the state office for 25 years and is now retiring with a golden parashutte. My sense is that he worked his way through med school and was an actual doctor for years probably supported his financial situation.
VofReason posted at 1:12 pm on Mon, Jul 2, 2012.
Ask any honest person who works in State, City or Federal Government how many positions are redundant and or filled with people who are under skilled and overpaid. The answer will likely not surprise most people. Then to salt the wound, they retire early and collect yet more money for 20-25 years into the future. Certainly this has nothing to do with why the Fed, States and Cities are facing mountains of debt if not bankrupcy . No, that is becuase rich people are greedy and won't pay higher taxes.
Mike McClellan posted at 3:40 pm on Mon, Jul 2, 2012.
Once again, a commenter has a suppostion unsupported by fact. Vof Reason writes, that "if markets always went up and we can rely on more and more taxpayer funding, everything would be fine."
Both are mistaken: ASRS had always been funded near 100%, in bull and bear markets -- the disaster of 2008 was (hopefully) an anomaly.
Second, more taxpayer money has not been required of ASRS. In fact -- and once again ,here come those pesky facts -- employees have always been required to foot half the contribution (and for one year, more than half).
Third -- once again -- VofReason conflates all three state pension plans together, which is deceptive. While taxpayers have indeed been contributing more to the polliticians' and law enforcement's pension plans, that hasn't been the case of the ASRS.
Fourth, VofReason picks up a popular right wing argument -- that pension plans are killing states and cities. Really? Think maybe, just maybe, that the economy hitting rock bottom for almost two years and even now barely regaining any ground had something to do with it? Wonder why you rarely heard about unfunded pensions prior to 2010? Maybe it was because states and cities weren't hit by a tsunami of an economic disaster, the worst since the Great Depression.
And that "golden parachute" he speaks of? Well, if you consider that the ASRS average pension is $19,000 a year, and if that same person elects to buy the health care plan at about $6,000 a year (or almost $12,000 if it's for the retiree and spouse), leaving a net of anywhere from $13,000 down to $7,000, well, that's an interesting "golden parachute."
samkat posted at 7:48 pm on Mon, Jul 2, 2012.
Tom: As I recall, you are a retired ER doctor. Did you fully fund your retirement or did you collect a pension from a hospital or other employer? Whether it is a government or a private employer, they are all feeling the crunch these days. By the way, if you funded your own retirement through an IRA or stocks as I did, you have to be feeling the pinch just as the rest of us are. I am not even making enough interest to break even these days.
mnjcpa posted at 9:14 pm on Mon, Jul 2, 2012.
You just can't get off the Arizona system Mike when VofReason & I are pointing out public pensions as a whole as if the Arizona system represents the rest of the country. It may not, but most look like this.
The IRS agent that I've worked with that just retired at 53 and moving to a golf course in Austin- $7,000 a month + healthcare for life. Or the 54 year old GM worker that I met with a $9k monthly fixed benefit. And a CA policeman at 55 with a $8500 Monthly pension. Again fixed for life. Each of these 'retirement plans' at a conservative discount rate represents over $4 million.
To your point 4 - the sheer weight of the liabilities on state & fed government books and number of people retiring far too early in their life has been the crushing impact on these systems - not the economy. You believe when people want government to be fiscally prudent that they're some 'right winger'. Could it ever be about fiscal responsibility? What a novel idea to actually spend less than we take in or demand a budget which we haven't had in 4 years.
What you're not understanding is the sheer depth of these liabilities. And how out of alignment the structure of them are as compared to what is available to private sector. And then the second someone like Scott Walker comes along & says 'hey, something's got to give' rather than be adult about it - bus loads of union thugs get bused in to solve the problem. They'd rather go bankrupt than work towards a balanced budget.
Private sector people don't have the luxury of these windfalls, yet they continue to be demolished through taxes to fund policies that don't even have a budget attached to them. I have clients that have lost 50-90% of their net worth and they don't get bus loads of union thugs singing their tune or Obama on the TV night after night demonizing them for their success.
The issue centers on this argument: it's preposterous to believe that in America that taxpayers pay public union employees a retirement plan that is far superior to their own. Good times or bad that fact still exists.
Maybe for you, but not a new topic for me.
Leon Ceniceros posted at 6:33 am on Tue, Jul 3, 2012.
WHEN YOU BEGIN SEEING ULTRA-LEFT WING LIBERAL CITIES LIKE SAN JOSE, SAN DIEGO AND STOCKTON CALIFORNIA (AND EVEN LOS ANGELES IS LOOKING INTO THIS ISSUE.....LA FOR GAWD'S SAKE....LOL)....SEEING THEIR CITIES GOING .........B.A.N.K.R.U.P.T........DUE TO THE 30%-40%-50% OF THEIR BUDGET GOING........OUT THE DOOR.........TO PAY 40YO COPS AND FIREMAN AND CITY WORKERS......1/2 OF THEIR SALARIES AS.......RETIREMENT PAYMENTS........FOR THE NEXT 30-40 YEARS ALONG WITH........."CAVIAR" RETIREMENT HEALTH CARE BENEFITS..................WHAT DO YOU EXPECT.
THE POWERS THAT BE IN MESA STILL ARE LOOKING AT THE COP/FIREMAN/CITY WORKER "VOTES" FOR THEIR RELECTIONS .......AND NOT THE....FUTURE FINANCIAL WELFARE OF MESA.
FROM WHAT I CAN FIGURE (AND PLEASE IF SOME CAN SHOWS US IN BLACK AND WHITE AND COMPUTER ACCESSIBLE).....MESA HAS A BILLION AND A HALF ($1,500,000,000.00) DEBT.
MESA (AGAIN WITH MY HIGH SCHOOL ACCOUNTING CLASS KNOWLEDGE...LOL)..........HAS ASSETS OF THREE AND ONE-QUARTER BILLION DOLLARS ($3,500,000,000.00).
THE BONDS THAT MESA HAS JUST GOTTEN APPROVED FOR THE BILLIONAIRE-FAMILY OWNED CUBS.... AND THE NEW BONDS THAT THEY ARE ASKING FOR.....ABOUT ANOTHER ONE HUNDRED MILLION DOLLARS TOTAL IS SHOCKING IN ITSELF...........MESA OWES 1/2 OF WHAT MESA OWNS.
NOW COULD SOME ONE PLEASE TELL ME........IN ADDITION TO THE MESA $1,500.000.000.00 = DEBIT..............HOW MUCH IS THE CITY OF MESA IN THE "HOLE" FOR IN REGARDS TO THE .............PUBLIC SECTOR (COPS, FIREMAN AND CITY WORKERS"................P.E.N.S.I.O.N......F.U.N.D..........????
VofReason posted at 12:33 pm on Tue, Jul 3, 2012.
I know Mike is reading directly off the ASRS pamphlet, but I will try to make it easier for him. Maybe the teacher, state worker, etc pays half of what the government agency contributes. However, different from the "real world", the tax payer are on the hook for the fixed benefit, no matter what the market does.